Finance
Fact-checked

At SmartCapitalMind, we're committed to delivering accurate, trustworthy information. Our expert-authored content is rigorously fact-checked and sourced from credible authorities. Discover how we uphold the highest standards in providing you with reliable knowledge.

Learn more...

What are Long Coupons?

Long coupons refer to the extended period between interest payment dates on a bond, often resulting from the timing of a bond's issuance. This can affect the bond's yield and pricing strategy. Understanding the nuances of long coupons is crucial for investors seeking to optimize their bond portfolios. How might these extended intervals influence your investment decisions? Let's examine further.
Mary McMahon
Mary McMahon
Mary McMahon
Mary McMahon

The term “long coupon” has two different meanings in the financial world, both related to bonds. One refers to a specific type of bond, while the other is a reference to an individual coupon period associated with a bond. Coupon periods are stretches of time during which interest accrues. At the end of each coupon period, an interest payment is made to the bondholder.

Bonds that mature in 10 years or more are known as long coupons. These bonds are purchased as long-term strategic investments, usually as part of a mixed portfolio that also includes short-term investments. A long coupon may have a more favorable interest rate because the bond issuer wants to provide an incentive for investors. Having funds locked up in a bond for an extended period of time is a hardship for investors, but that can be sweetened with high interest.

Businessman with a briefcase
Businessman with a briefcase

The maturity period and interest offered on a bond are disclosed at the time of sale. People can usually choose between a number of bond products to find the one that suits their needs. Investors can consult financial advisors to get recommendations on specific bonds, as well as rate information about current bond offerings, so they can be aware of their options. This information is also published in financial publications and is often available online as well.

Long coupons can also be coupon periods that are unusually long when compared to the other coupon periods associated with the bond. Most commonly, the first coupon period is the long coupon. For example, a bond might be issued with six-month coupon periods and a long coupon at first that does not pay interest for a year. Long coupons are also disclosed at the time of sale so investors can make decisions about the bond products they want to buy.

For people making long-term investments, long coupons can be suitable investment products because they can earn more money over time for the investor. However, they also tend to be more difficult to sell and are not a very liquid form of investment. People who think they are going to need funds in the near future should find more flexible investment options to avoid taking a loss on long coupons and other long-term investment products. Mixing illiquid long-term investments with liquid short-term ones that have lower returns can also be a way of providing investment flexibility.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Learn more...
Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Learn more...

You might also Like

Discuss this Article

Post your comments
Login:
Forgot password?
Register:
    • Businessman with a briefcase
      Businessman with a briefcase